Analysis of the Influence of Return on Assets (ROA) and Company Size on Earnings Quality

profitability indicates a low quality of earnings and vice versa if the level of profitability is high, it can be said that the company has a good ability to generate profits(Soly & Wijaya, 2018)

Many researchshows that ROA (Return On Assets) has a positive effect on earnings quality(Fachrurrozie & Purnamasari, 2020; Kurniawan & Suryaningsih, 2019; Warrad, 2017). However, another findingstates that ROA (Return On Assets) has no effect on earnings quality(Ginting, 2017; Kusmuriyanto & Agustina, 2014; Mariska & Suprapta, 2021; Setiawan, 2017; R. Wulandari, 2021). Findings about firm size have a positive effect on earnings quality(Ananda & Ningsih, 2016; Fachrurrozie & Purnamasari, 2020), andSetiawan (2017)states that firm size has a negative effect on earnings quality

Based on previous research, it was found that the results were not the same so that researchers were interested in re-examining the research by replicating Mariska & Suprapta's (2021) research with the title "The Effect of Profitability, Firm Size, and Investment Opportunity Set (IOS) on the Earnings Quality". The object of this research is a company engaged in the food and beverage sector which is listed on the Indonesia Stock Exchange (IDX), in this study using the latest time period, namely 2018-2020. This study adds the independent variables of profitability and firm size. The title of this research is "Analysis of the Effect of Return on Assets (ROA) and Company Size on Earnings Quality" in companies engaged in the food and beverage sector listed on the Indonesia Stock Exchange (IDX) in 2018-2020.

II. LITERATURE REVIEW

Jensen dan Meckling (1976) argues that agency theory is a working relationship between the principal (owner) and agent (manager). As agents, managers are morally responsible with the aim of maximizing the principal's profits, but on the other hand managers have an interest in maximizing their personal welfare as well. Therefore, it is very likely that the agent does not always act in the best interests of the principal and thus creates an agency problem. The agency problem is a problem created due to a conflict of interest between the principal and agent so that it can affect the quality of reported earnings(Ananda & Ningsih, 2016).

In the context of signaling theory that cannot be separated from the existence of information asymmetry, the government tries to give a good signal to the people. In the framework of the information asymmetry that occurs between the principal and the agent, it is suggested that the company's signal is a very crucial thing that must be considered by the company in order to maintain economic resources for the company (Ross (1973).Watt & Zimmerman (1986)explained that in this theory, companies provide the best possible information so that government authorities can give a positive response to the company in the political terms that the company has transferred their assets through taxes, levies, and other social responsibilities, this is what makes managers motivated to do corporate governance disclosure(Handayani & Rachadi, 2009).

Hodge (2003) defines earnings quality as "the extent to which net income is reported on the income statement diers from "true" (unbiased and accurate earnings)". Or it can be interpreted as the extent to which net income has been reported in the profit and loss section, not truth or income that is inaccurate or biased(Setiawan, 2017) Earnings quality is a measure that describes or reflects the quality of financial statements that can be used as a reference and reliable or not. Quality earnings must be in accordance with the criteria of relevance and faithfully representative, or can represent the actual situation(Mariska & Suprapta, 2021)

Profitability is a ratio to assess the ability of a company to earn profits and to measure how much the level of effectiveness of management in a company. Therefore, profitability can be related to the quality of the profit itself(Nadzifah & Sriyana, 2020) Return on assets (ROA) shows the effectiveness of a company in managing assets both from the company's personal capital or from loan capital, investors will see how effective a company is in managing its assets. The higher the level of ROA, it will have an effect on the volume of stock sales, meaning that the high and low ROA will affect investors' interest in conducting investigations so that it will affect the sales volume of the company's shares(Setiawan, 2017)

III. METHODOLOGY RESEARCH

This type of research is quantitative research. This research is a comparative causal research, namely research with the characteristics of the problem in the form of cause and effect between two or more variables. In this study, the causeand-effect relationship to be examined is the effect of return on assets (ROA) and firm size on earnings quality The population in this study are food and beverage sector companies listed on the Indonesia Stock Exchange (IDX) for the 2018-2020 period The data used in this study is secondary data in the form of financial statements of companies